Tyson D. Van Alfen

Real estate shocks and financial advisor misconduct

with Stephen G. Dimmock and William C. Gerken

Revise and resubmit to Journal of Finance

We test whether household wealth shocks affect professional misconduct by financial advisors. Using a novel panel containing all home addresses belonging to 434,447 advisors, we exploit within-advisor variation and show that advisors increase misconduct following declines in their homes' values. We find similar results in specifications that exploit variation in cumulative house price return, allowing us to limit the comparison to advisors living in the same ZIP code during the same year. We find evidence that the increase in misconduct is due to willful actions by advisors, such as unauthorized or excess trading, as well as neglect or distraction due to financial pressure.

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Managerial myopia and product market reputation:
Evidence from Amazon.com reviews

Using a novel dataset of customer reviews from Amazon.com, I study the impact of managerial myopia on product market reputation. Using exogenous variation due to the timing of CEO equity vesting events, I show that short-term incentive shocks predict declines in reputation. A changing product market lineup and a deterioration of existing products are two mechanisms through which reputation is affected. The effect is larger when the CEO has other short-term concerns and when the firm has a low reputation in the product market. However, higher advertising expenses mitigate the negative reputational effect among consumers. Using an alternative empirical methodology, I find that higher short-term ownership in the firm is also associated with declining product market reputation, while higher long-term ownership is associated with increasing reputation.

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